Building Rental Unit on property

[Chris Williams]

Hey all,

Question for you. We have 5 acres in a very good location in CA. Close to colleges, hospitals, shopping, great schools, etc.

Lately, we've been throwing around the idea of creating/building an accessory unit/small cottage on our land and renting it out like a regular rental. The unit would run off its own power, we would need to install septic, etc. total cost could be around $80-100k. We would have to finance this. 

Based on local units, we could expect to charge a monthly rent of approx $1800 or so. 

Has anybody done this? I know there are codes, etc to be taken into consideration, but just curious what others have experienced in regards to this. What did you use to finance? Home Equity v regular loans?

There's a lot to consider, like type of unit, contractors, etc. 

but after we get our initial investment back, the rental profit could be quite excellent. 

Thanks for the feedback!

CW

[Maxwell Anyimah-mensah]

@Chris Williams, As long as Zoning allows for an A.D.U on your property, in will advice that you talk to a lender and see if you can refi and take out your money back after building and renting out the A.D.U. I recently completed the same process.

1. Take a 52K heloc on actual property.

1. Build an accessory dwelling unit on my property. $52k

2.Rented it out. $850

3.Cash out refinance the property $53K

4.Bought a condo town house cash with proceeds from refi. 72K

5. Rented out the condo town house. $750

6.In the process of cash out  refiancing the condo town house 70%=96K  to purchase a multi family dwelling. 

Started with 52k but pulling out 70% equity at 96k  through current refinancing.  So what you are conceiving is totally doable.